your tax headquarters

Taxes are the main source of revenue for the federal government, which uses the money to fund various public services and programs, such as national defense, education, health care, infrastructure, and social security. Paying taxes is a civic duty and a legal obligation for most Americans. 

The tax deadline is usually April 15th of each year, unless it falls on a weekend or a holiday, in which case it is pushed to the next business day. However, due to the COVID-19 pandemic, the IRS has extended the tax deadline for 2020 returns to May 17th, 2021. You can request an extension of six months if you cannot file by the deadline, but you still have to pay any taxes you owe by the original due date.

 

If you fail to file or pay your taxes on time, you may face penalties and interest from the IRS. The failure-to-file penalty is 5% of your unpaid taxes for each month or part of a month that your return is late, up to 25%. The failure-to-pay penalty is 0.5% of your unpaid taxes for each month or part of a month that you don't pay your taxes after the due date, up to 25%. You may also face collection actions from the IRS, such as liens, levies, or garnishments. 

There are several ways to lower your tax liability, such as taking advantage of tax deductions and credits. Tax deductions reduce your taxable income, while tax credits reduce your tax owed dollar for dollar. Some common tax deductions include mortgage interest, charitable contributions, medical expenses, and retirement contributions. Some common tax credits include child tax credit, earned income credit, education credit, and recovery rebate credit. 

Before you can apply the tax brackets to your income, you need to calculate your taxable income. This is the amount of money that is subject to federal income tax. To do this, you need to subtract certain deductions and adjustments from your gross income, which is your total income from all sources.

There are two ways to claim deductions: the standard deduction or the itemized deduction. The standard deduction is a fixed amount that reduces your taxable income based on your filing status. For 2021, the standard deduction is $12,550 for single filers, $25,100 for married filing jointly, and $18,800 for head of household. The itemized deduction is a list of expenses that you can deduct from your gross income, such as mortgage interest, state and local taxes, medical expenses, and charitable donations. You can choose whichever method gives you a lower taxable income.

Some adjustments that you can subtract from your gross income are student loan interest, IRA contributions, alimony payments, and self-employment taxes. These are also known as above-the-line deductions, because they reduce your adjusted gross income (AGI), which is the amount that determines your eligibility for certain tax credits and benefits.

After you subtract your deductions and adjustments from your gross income, you get your taxable income. This is the amount that you apply the tax brackets and rates to calculate your federal income tax.

Adjusted gross income (AGI) is a key figure in your federal income tax calculation. It is your gross income minus certain adjustments, such as student loan interest, IRA contributions, alimony payments, and self-employment taxes. These are also known as above-the-line deductions, because they reduce your income before you claim any other deductions.

Your AGI determines your eligibility for certain tax credits and benefits, such as the earned income tax credit, the child tax credit, the retirement savings contribution credit, and the premium tax credit. It also affects the amount of some itemized deductions, such as medical expenses and miscellaneous expenses. Generally, the lower your AGI, the more tax benefits you can claim.

To calculate your AGI, you need to report all your income from all sources, such as wages, salaries, tips, interest, dividends, capital gains, business income, rental income, and retirement income. Then, you subtract any adjustments that apply to you from your gross income. You can find the list of adjustments on Schedule 1 of Form 1040. The result is your AGI, which you report on line 11 of Form 1040.

Tax credits are a type of tax benefit that reduce your tax liability dollar for dollar. Unlike deductions, which lower your taxable income, tax credits lower your tax bill directly. For example, if you owe $2,000 in taxes and you claim a $1,000 tax credit, you only have to pay $1,000 in taxes.

There are two types of tax credits: refundable and nonrefundable. Refundable tax credits can give you a tax refund even if you have no tax liability. This means that if the amount of the credit is more than the amount of tax you owe, you get the difference as a refund. Nonrefundable tax credits can only reduce your tax liability to zero. This means that if the amount of the credit is more than the amount of tax you owe, you do not get any refund.

Some examples of refundable tax credits are the earned income tax credit, the child tax credit, the American opportunity tax credit, and the premium tax credit. Some examples of nonrefundable tax credits are the lifetime learning credit, the adoption credit, the foreign tax credit, and the residential energy credit. You can find the list of tax credits on Schedule 3 of Form 1040 and claim them on line 32 of Form 1040.

Business taxes and personal taxes are two different types of taxes that apply to different entities and income sources. Business taxes are income taxes paid by businesses on their net earnings, while personal taxes are income taxes paid by individuals on their income from various sources, such as wages, salaries, dividends, interest, etc. Business taxes and personal taxes have different forms, deadlines, rates, and deductions, depending on the type and size of the business or the individual's tax bracket. For example, a sole proprietorship is a type of business that is taxed as an individual, meaning that the owner pays personal tax rates on their self-employment income, which can range from 10% to 37%, plus a 15.3% self-employment tax. On the other hand, a corporation is a type of business that is taxed as a separate entity, meaning that it pays a flat 21% corporate tax rate on its profits, and its shareholders pay personal tax rates on their dividends. Therefore, it is important to understand the differences between business taxes and personal taxes and how they affect one's tax liability and obligations.

Business taxes and personal taxes are two different types of taxes that apply to different entities and income sources. Business taxes are income taxes paid by businesses on their net earnings, while personal taxes are income taxes paid by individuals on their income from various sources, such as wages, salaries, dividends, interest, etc. Business taxes and personal taxes have different forms, deadlines, rates, and deductions, depending on the type and size of the business or the individual's tax bracket. For example, a sole proprietorship is a type of business that is taxed as an individual, meaning that the owner pays personal tax rates on their self-employment income. Self-employment income is the income earned by individuals who work for themselves, such as freelancers, independent contractors, or small-business owners. Self-employment tax is a tax that self-employed individuals pay to fund Social Security and Medicare programs. The self-employment tax rate is 15.3%, which consists of 12.4% for Social Security and 2.9% for Medicare. On the other hand, a corporation is a type of business that is taxed as a separate entity, meaning that it pays a flat 21% corporate tax rate on its profits, and its shareholders pay personal tax rates on their dividends. Therefore, it is important to understand the differences between business taxes and personal taxes and how they affect one's tax liability and obligations.